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Orange on telecom hit-list
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February 4, 2000: 9:51 p.m. ET
U.K. cellular operator back in play after Vodafone deal; Telekom also eyed
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LONDON (CNNfn) - Investors on Friday snapped up shares of European telecom companies that are expected to take part in the next round of merger activity in the industry. British cellular operator Orange could be one of the first assets to change hands following Mannesmann's acceptance of Vodafone AirTouch's $198 billion takeover bid.
Antitrust authorities in Europe will require the enlarged Vodafone-Mannesmann to shed Orange, Britain's third-largest cellular player, which the German company bought last year for $36 billion, because Vodafone already is the U.K.'s number one mobile company.
Meanwhile, shares of mobile and fixed-line phone companies across Europe climbed on hopes they will benefit amid the scramble to form ever larger telecom groups. Royal KPN of the Netherlands jumped 9 percent, and in France Bouygues, Vivendi and France Telecom all gained as investors placed their bets in the takeover stakes.
Vodafone-Mannesmann "was a precedent-setter, like Olivetti's acquisition of Telecom Italia," said Richard Blakesley, managing director of mergers and acquisitions at Chase Manhattan in London. "There will be a period of asset shuffling." Upstart mobile-phone operator Olivetti last year won a hostile $35 billion takeover battle for the far larger Telecom Italia, opening up new possibilities for acquisitive companies.
KPN shares soared to a record after the company expressed its interest in Orange. Vodafone is planning to split Orange off and seek a new stock market listing for its shares, rather than selling it directly to a rival company, according to a Reuters report Friday. That would still leave Orange as a potential takeover target, however.
Among other companies that media and analyst comment has previously linked to Orange, France Telecom (PFTE) gained 3 percent, after earlier leaping as much as 9 percent. Diversified utility Vivendi (PEX) was up by less than 1 percent higher; while the company was thought unlikely to bid after agreeing an Internet deal with Vodafone last month, the French firm has made it clear that it still covets a presence in the U.K. market. Analysts had earlier cited Rome-based Telecom Italia Mobile and Texan telecom operator SBC Communications as possible buyers for Orange.
On Monday, shares of Japan's NTT Docomo rose 1.33 percent in early trading in Tokyo following a report in England's Sunday Business newspaper that the mobile phone giant is considering a $35 billion bid for Orange. The newspaper cited investment bankers who said that Docomo had already drawn up bid proposals.
Docomo said Monday it had no comment on the report. "In terms of our overseas investments, as we have repeatedly said we are mulling broad investment opportunities in Asia and Europe. But on this particular case, we are not at a stage where we can make any official comment, including whether we are now considering such a bid," a Docomo spokesman said.
German telecom feels the pressure
Mannesmann's capitulation also piled pressure on Deutsche Telekom (FDTE), which stands to lose its title of Europe's largest telecom operator. With intense domestic competition slashing domestic profits, chief executive Ron Sommer is seeking to rebuild the company's international exposure after the collapse of its alliance with France Telecom. The two parted company when Deutsche Telekom last year went it alone with an unsuccessful bid for Telecom Italia.
Telekom has already filled one gap in its European cellular presence with the purchase of One2One, Britain's fourth-biggest mobile operator, and moved into the French market with the acquisition of Siris, the second-largest provider of business telecom services. France Telecom is already in Germany after acquiring a stake in E-Plus, the country's No. 3 cellular company.
Telekom shares have surged this week, though analysts said this was a continuing reaction to the plan, unveiled last week, to list its Internet operation T-Online in 2000. However, Deutsche has been linked with Bouygues, the French construction firm that also controls the country's second-largest mobile company. Bouygues (PEN) shares jumped 8 percent in Paris Friday.
British Telecommunications (BT-A) is the other large player under pressure to boost its European presence. The U.K. company, formerly the country's monopoly provider of fixed-line telecommunications, continues to be linked to Spain's Telefonica, and last month confirmed alliance talks with the Madrid-based operator. 
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